Annuities continue to pose an attractive option for pension investors, despite rates slowly drifting down from their highs at the end of 2022, says Hargreaves Lansdown.
According to the latest data from Hargreaves Lansdown’s annuity calculator, a 65 year old with a £100,000 pension could generate up to £6,782 a year. While rates are lower than in the immediate aftermath of last year’s mini-Budget, they continue to be 19% higher than this time last year.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “After drifting slowly down from their post mini-Budget highs we’ve seen a modest increase in the annuity incomes on offer over the past month. There are no guarantees but if the Bank of England chooses to hike rates again on Thursday, then we could see these incomes boosted a bit more in the coming weeks.
“Annuities may not be the retirement powerhouse they were before the advent of Pension Freedom and Choice but if you are looking for a guaranteed income in retirement then they should be considered. For many years, the incomes available from annuities were low but over the past year we’ve seen a real revival in rates, partly because of increased interest rates. This means many more people are considering them as part of their retirement plan.”
Hargreaves Lansdown says people should get a quote on the open market, exploring different providers and different rates and include health and lifestyle conditions which may see them receive an income boost.
Pension savers considering an annuity should also consider inflation protection, noting that income from a flat rate option may appear decent at the time but may not look “quite so generous” as the years pass. The pension specialist also says married individuals or those in a civil partnership should consider purchasing a joint life annuity.
Finally, Hargreaves Lansdown said people should consider buying their annuity in stages, meaning they can secure their basic needs and leave the rest of their funds invested to grow over time.
